Should I make a pre-auction offer on a property?

We examine how and when jumping the auction queue can work in your favour.

icon of a hammer When you’ve found the perfect property, the prospect of competing against other buyers at auction can be pretty intimidating. It can be tempting to try to avoid auction altogether with a pre-auction offer. This isn’t always a bad idea, but it’s imperative to first learn when, why and how you should make an offer prior to auction.

Know why they might say yes

Auctions are an incredibly popular way to sell homes in Australia. According to realestate.com.au, 20% of homes from September 2014 to September 2015 sold via auction. In capital cities this number was even higher, with around 30% of Sydney and Melbourne homes selling at auction.

It’s easy to see why vendors might want to take their chances at auction. After all, there’s no upper limit to what one could receive at auction, and the competitive bidding environment can serve to push prices skyward.

Likewise, there are plenty of reasons why a vendor might want to avoid auction. Recent auction results could make vendors a bit more wary about trying their chances. Auction clearance rates have been trending lower over recent weeks. According to CoreLogic, the combined capital city auction clearance rate for the week ending 24 September 2017 was 70.7%, down from 75.4% for the same week in 2016.

Auctions can be expensive endeavours. When taking into account marketing and the services of an auctioneer, Openagent.com.au estimates the expense of auctioning a $700,000 home could be up to $7,000. That’s a big gamble in a market where clearance rates are falling.

Time can be another factor that makes vendors rethink going to auction. Some vendors may have already found another property, and may be keen to sell their old property as quickly as possible. In a situation like this, a four-week marketing campaign for an auction can seem like an eternity.

If you understand some of the factors that could motivate vendors to sell prior to auction, you can make an informed assessment of the market and determine whether it’s likely vendors are looking to avoid auction.

Do the research

Before you make an offer on a property, make sure you know enough about its value to put yourself in serious contention.

Any property going to auction will have a rough idea, even before the campaign begins, of a price guide. While some vendors and agents can be a bit cagey on the question, you can usually get an idea of the suggested price if you ask directly.

But this is far from the only factor determining the price a property is likely to attract. Put in the time to research what price the property is likely to fetch at auction.

Where (and how) to find accurate property prices)

You can usually get a rough idea of the median price for similar properties by searching the property’s address on Domain or realestate.com.au. To get an even better idea, look at recent sales of similar properties. You’ll need to put some time in doing research to find truly comparable properties. Remember, not all two-bedroom houses are created equal, so pay attention to the condition, floor space, land space and amenities of the other sales in the area.

Show genuine interest

Demonstrate to the vendor and their agent that you’re interested in the property. You might want to attend several of the open inspections to begin to build a rapport with the agent and show you’re serious about the property.

When you do attend inspections, ask questions. Get as many specifics as you can about the house itself, and about the vendor, their goals and their expectations. Remember, the agent works for the vendor so they’re not likely to give away any sensitive information. However, you do want to demonstrate a genuine interest in understanding what the vendor is looking for and what offers they might be likely to consider.

You can also show you’re serious by taking some additional steps to research the property. Ask the agent for the contract of sale, and ask if there’s a building and pest inspection report you can purchase. Taking steps like this can set you apart from the rest of the crowd.

Make an offer they can’t refuse

It may seem counterintuitive, but when you make a pre-auction offer you need to go in bold and aggressive. In most business negotiations, you might want to hold your cards close and hesitate to give too much away. This strategy is unlikely to work when you’re trying to convince a vendor to sell before auction.

Make the vendor an offer near the upper limit of what you’re willing to pay. Remember, you’re trying to convince them that it’s worth avoiding auction to take your offer. You’re not going to accomplish that with a lowball price.

In addition to offering an enticing price, try to offer enticing terms as well. You can offer a short settlement time, a bigger deposit or even waive the cooling-off period. You want to offer the vendor better terms than they can expect at auction.

Be prepared

If your offer is accepted, you need to be organised and ready to make good on it.

This means you’ll need to have your deposit cheque ready to deliver to the vendor as soon as your offer is accepted. It also means you’ll want to have finance in order for you to move to settlement in a reasonable timeframe. It’s worth getting home loan pre-approval before you make an offer. This means you'll need to compare your options to find the right home loan for your situation.

You also need to be ready to exchange contracts quickly. It could be worth having a solicitor look over the contract of sale before you put in your offer. Remember that until contracts are exchanged, there’s nothing stopping the vendor from entertaining other offers.

Be sure it’s the best strategy

The major caveat to all of the above is to be certain that making an offer prior to auction is a strategy you’re comfortable with. There’s every possibility that a pre-auction offer will see you paying more for a property than if you had gone to auction.

If your offer is rejected, you run the risk of merely adjusting the vendor’s price expectations upwards. This means the vendor and their agent can now tell any other potential buyers that they’ve had interest above the original price guide. Your offer now becomes the floor for everyone else.

If you do choose to make an offer prior to auction, you should do so because market conditions seem to favour buyers, and you think you can secure the property at a reasonable price without competing with others at auction. A pre-auction offer might not always be the right strategy, but if you know what you’re willing to pay and you want to take other buyers out of the running, it could be worth the risk.

Compare some of the market's best home loans below

Rates last updated August 22nd, 2018
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Name Product Interest Rate (p.a.) Comp Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment Short Description
loans.com.au Essentials - Variable (Owner Occupier, P&I)
3.64%
3.66%
$0
$0 p.a.
80%
Competitive interest rate and limited fees
A simple mortgage with a competitive interest rate and no application or monthly fees. Borrow up to $2 million from a convenient online lender.
UBank UHomeLoan Variable Rate - Discount offer for Owner Occupiers, P&I Borrowing over $200,000
3.59%
3.59%
$0
$0 p.a.
80%
Special discounted interest rate
Enjoy flexible repayments, a redraw facility and the ability to split your loan. Plus, pay no application or ongoing fees.
Tic:Toc Live in Loan Variable Rate - Principal & Interest
3.64%
3.65%
$0
$0 p.a.
80%
Get approved faster with a speedy online application
Low interest rate and limited fees. Add a 100% offset account for $10 a month.
ClickLoans The Online Home Loan - LVR <70% with Offset
3.70%
3.90%
$0
$0 p.a.
70%
Requires a 30% deposit
Enjoy all the benefits of the Basic Home Loan and take advantage of an offset account.
ME Flexible Home Loan With Member Package - LVR <=80% $400k up to $699,999 (Owner Occupier, P&I)
3.69%
4.11%
$0
$395 p.a.
80%
Save on interest with a 100% offset account
Unlock a range of savings with this competitive package home loan offer. Offset account and redraw facility included.
Greater Bank Ultimate Home Loan - Discounted 1 Year Fixed LVR ≤90% ($150K+ Owner Occupier)
3.49%
4.57%
$0
$395 p.a.
90%
Save on interest with a 100% offset account
Loans over $150k get a discount off an already low fixed rate. Available for NSW, QLD and ACT residents only.
Macquarie Bank Basic Home Loan - LVR up to 70% (Owner Occupier, P&I)
3.75%
3.75%
$0
$0 p.a.
70%
This sharp rate product requires a 30% deposit
Pay no application or ongoing fees and get a flexible loan with the ability to split up to 6 times.
ClickLoans The Online Home Loan - LVR <80%
3.84%
3.84%
$0
$0 p.a.
80%
Low fee online mortgage
Pay no application or ongoing fees and get access to a free redraw facility with this innovative online lender.
Mortgage Choice Plus Home Loan - OO LVR <=70% ($150k+) P&I Only
3.71%
3.71%
$0
$0 p.a.
70%
A variable rate home loan that has a lot of flexible features. This loan has a 100% offset account.
Mortgage House Affordable First Home Buyer Special (Owner Occupier, P&I)
3.64%
3.68%
$0
$0 p.a.
80%
A competitive interest rate for first home buyers that keeps fees low. You will need a 20% deposit and can borrow up to 500000.
Virgin Reward Me Variable Home Loan - LVR <= 80% ($500k to $750k Owner Occupier, P&I)
3.68%
3.82%
$0
$10 monthly ($120 p.a.)
80%
Earn Velocity Frequent Flyer Points with this mortgage to spend on flights and more (subject to eligibility requirements). Redraw facility available on this variable rate home loan. Competitive interest rate.
Newcastle Permanent Building Society Premium Plus Package Home Loan - New Customer Offer ($150k+ Owner Occupier, P&I) Discount 1
3.72%
4.10%
$0
$395 p.a.
80%
100% offset account plus package discounts
New borrowers or refinancers can get a discounted rate with this package loan. Bonus $1,500 cashback for refinancers.
Mortgage House Advantage Variable Home Loan COMBO - Owner Occupier 70 (Special)
3.64%
3.79%
$0
$10 monthly ($120 p.a.)
70%
100% offset account and a competitive rate
Low rate, low fee loan for owner-occupiers. You will need a 30% deposit to get this mortgage.
Homestar Finance Variable Rate Home Loan - Owner Occupier ($900 cashback)
3.54%
3.59%
$0
$0 p.a.
80%
$900 cashback offer on settlement
Get a competitive rate, save on fees and access a 100% offset account plus redraw facility.
CUA Balanced Variable Home Loan - New Lending only (Owner Occupier, P&I)
3.65%
3.66%
$0
$0 p.a.
90%
Competitive interest rate and low fees. Available with a 10% deposit. Partial offset account attached (offset up to $15,000).
Bankwest Complete Home Loan Package Variable - LVR <=90% (Owner Occupier, P&I)
3.70%
4.13%
$0
$395 p.a.
90%
Get this loan with a 10% deposit
Package your loan with an eligible credit card for discounts on rates and fees, and get a 100% offset account.
Virgin Reward Me Variable Home Loan - LVR <= 80% ($750k+ Owner Occupier, P&I)
3.64%
3.78%
$0
$10 monthly ($120 p.a.)
80%
Earn thousands of Velocity Frequent Flyer Points on your mortgage (subject to eligibility requirements). Plus, access a 100% offset account to save on interest.
Yellow Brick Road Rate Smasher Home Loan
3.64%
3.64%
$0
$0 p.a.
70%
A low interest rate home loan with no application or ongoing fees.
Bank Australia Basic Home Loan - Special LVR <80% (Owner Occupier)
3.65%
3.66%
$0
$0 p.a.
80%
Sharp interest rate and low fees
This special rate mortgage has no ongoing fees and offers flexible repayments. Save $595 in establishment fees before 30 September.
Community First Accelerator Home Loan Package - >$250k New Money Offer (Owner Occupier, P&I)
3.59%
3.99%
$600
$395 p.a.
95%
Get interest rate discounts and waived fees on this package loan with a 100% offset account.
Bankwest Complete Home Loan Package Fixed - 2 Year Fixed Rate LVR <90% (Owner Occupier, P&I & $200k+)
3.88%
4.40%
$0
$395 p.a.
90%
Lock in a very competitive 2 year rate and get package discounts on your credit card and offset account.
Macquarie Bank Basic Home Loan - LVR ≤ 80% (Up to $750,000 Owner Occupier, P&I)
3.85%
3.85%
$0
$0 p.a.
80%
Flexible, low fee mortgage
Pay no application and ongoing fees with Macquarie Bank Basic Home Loan. Split and redraw facilities included.
Mortgage Choice Basic Variable Rate - OO LVR <= 70% ($150k +) P&I Only
3.64%
3.64%
$0
$0 p.a.
70%
A basic variable home loan that offers a competitive interest rate with no application fees and no ongoing fees.
Tic:Toc Live in Fixed Rate Home Loan - 1 Year (Owner Occupier, P&I)
3.64%
3.79%
$0
$0 p.a.
80%
Apply online for this fixed rate, low-fee loan with redraw facilities and an optional offset account.
Bankwest Complete Home Loan Package Fixed - 3 Year Fixed Rate LVR <90% (Owner Occupier, P&I & $200k+)
3.98%
4.41%
$0
$395 p.a.
90%
Take advantage of a low 3 year fixed rate, 40% offset account and no application fee.
loans.com.au Offset Variable - Up to 80% LVR (Owner Occupier P&I)
3.72%
3.74%
$0
$0 p.a.
80%
100% offset account and a 10% deposit option
Save on interest by taking advantage of a 100% offset account along with no ongoing fees or application fees.
Tic:Toc Live in Loan Fixed Rate - 3 Years (Owner Occupier, P&I)
3.84%
3.82%
$0
$0 p.a.
80%
A fixed rate loan with free redraws, few ongoing fees. Apply online with a fast approval process.
loans.com.au Package Special - 2 Year Fixed (Owner Occupier, IO)
3.89%
3.94%
$0
$0 p.a.
80%
Sharp fixed rate loan
Pay no application or ongoing fee and borrow up to 80% LVR.
Mortgage Choice Basic Variable Rate - OO LVR <= 80% ($150k +) P&I Only
3.74%
3.74%
$0
$0 p.a.
80%
A basic owner-occupier home loan with a low variable rate that requires a 20% deposit.
Newcastle Permanent Building Society  Premium Plus Package Fixed Rate - 1 Year Fixed (Owner Occupier, P&I)
3.59%
4.74%
$0
$395 p.a.
90%
Get this package loan with a 10% deposit
Enjoy a competitive rate with no application fee for this package loan.
Beyond Bank Low Rate Special Home Loan - LVR ≤ 80% (Owner Occupier)
3.79%
3.79%
$0
$0 p.a.
80%
Minimal fees and a 100% offset account
Access an offset account and pay no application or ongoing fees on this special variable rate for owner-occupiers.
State Custodians Low Rate Home Loan with Offset - LVR 80% to 90% (Owner Occupier, P&I)
3.88%
3.89%
$0
$0 p.a.
90%
Low deposit, low rate mortgage
Save on interest with a free 100% offset account and buy your property with just a 10% deposit.
Greater Bank Great Rate Discount Variable with Family Pledge Home Loan - Up to 110% LVR
3.74%
3.74%
$0
$0 p.a.
110%
Borrow up to 110% with a guarantor
Pay no deposit or LMI and get a discounted rate with this family pledge loan. Requires a family member to act as guarantor. NSW, Qld and ACT only.
Auswide Bank Variable Home Loan Plus with Freedom Package - $100K+ LVR <= 90% (Special Offer, Owner Occupier)
3.76%
4.15%
$0
$395 p.a.
90%
Discount special offer with a 100% offset account
A high maximum LVR home loan with redraw facility and additional payments. Get this mortgage with a 10% deposit.
Heritage Bank Discount Variable Home Loan - LVR <=80% (Owner Occupier) New Customers Only
3.67%
3.69%
$0
$0 p.a.
80%
Low interest rate for new customers
Family guarantee option available. Enjoy flexible repayments and a low minimum loan amount.
Mortgage Choice Plus Home Loan - OO LVR <=80% ($150k+) P&I Only
3.81%
3.81%
$0
$0 p.a.
80%
A home loan with a competitive rate and plenty of handy features. This product comes with a 100% offset account.
Bank First First Rate Home Loan - LVR < 80%
3.64%
3.69%
$600
$0 p.a.
80%
Low fees and low interest rate
A competitive variable rate for borrowers with a 20% deposit or more. Guarantor option available.
AMP Essential Home Loan  -  $100,000 and above (Owner Occupier)
4.04%
4.07%
$0
$0 p.a.
90%
Get this loan with a 10% deposit
For a limited time, pay no application or settlement fees. You can also take advantage of a free redraw facility.
loans.com.au Offset Variable - Package Offset (Investment, P&I)
3.97%
3.99%
$0
$0 p.a.
80%
Competitive investment package loan
Package your owner occupied loan with investment loan and receive a discounted investment rate. 100% offset account included.
AMP Professional Package Variable Rate Home Loan - $750,000 and above (Owner Occupier, P&I)
3.72%
4.11%
$0
$349 p.a.
90%
10% deposit option available
Package your loan with other AMP products and save on rates and fees.
Macquarie Bank Offset Home Loan  - LVR ≤ 70% (Owner Occupier, P&I)
3.75%
4.00%
$0
$248 p.a.
70%
100% offset account included
Borrowers with a 30% deposit can get this competitive rate.
QBANK Fixed Home Loan - 1 Years Fixed Discounted LVR 90% (Owner Occupier Special Offer)
3.62%
4.49%
$0
$0 p.a.
90%
Get a competitive rate and avoid ongoing fees. This loan is only available to current and former employees of eligible Queensland government organisations.
ME Basic Home Loan - LVR <=80% (Owner Occupier, P&I)
4.09%
4.11%
$0
$0 p.a.
80%
Simple residential mortgage product
This variable rate loan keeps the features simple and fees low. This loan is offered by a 100% online lender.
loans.com.au - 2 Year Fixed (Owner Occupier, P&I)
3.89%
3.94%
$0
$0 p.a.
90%
Available with a 10% deposit
Borrow up to 90% of the value of the property you're buying, and pay no application fee.
Suncorp Back to Basics Home Loan - Better Together Special Offer $150k+ LVR<=90% Incl. LMI (Owner Occupier, P&I)
3.68%
3.69%
$0
$0 p.a.
90%
Available with a 10% deposit
Get one free online redraw per month and pay no ongoing fees. Application fees are waived for loans above $150,000.
State Custodians Low Rate LOC - LVR up to 80% (Owner Occupier, IO)
3.93%
3.94%
$0
$0 p.a.
80%
Use your home equity with a low rate
A low-fee line of credit loan from an online lender. Unlock the equity in your home and make interest-only repayments with a competitive rate.
Macquarie Bank Basic Home Loan - LVR up to 70% (Investor, P&I)
3.99%
3.99%
$0
$0 p.a.
70%
Save on fees with this investor mortgage
Investors with a 30% deposit can get this low rate loan to fund their property portfolio.
State Custodians Low Rate Home Loan with Offset - LVR 80% to 90% (Investor, P&I)
4.13%
4.14%
$0
$0 p.a.
90%
Available with a 10% deposit
Access a fee-free offset account and a special interest rate for investors.
Greater Bank Great Rate Home Loan - Discounted Variable ($150K+ Owner Occupier) New Loans only
3.83%
3.83%
$0
$0 p.a.
90%
Special discount rate
New customers can get a discounted variable rate and a fee-free redraw facility. NSW, QLD and ACT residents only.
Mortgage House Advantage Variable Home Loan - LVR 95 Special (Owner Occupier, P&I)
4.24%
4.27%
$0
$0 p.a.
95%
Low deposit loan for investors
Buy a home with just a 5% deposit and get flexible repayment options and a redraw facility.
UBank UHomeLoan - 1 Year Fixed Rate (Owner Occupier, P&I)
3.59%
4.14%
$395
$0 p.a.
80%
Competitive interest rate
A one year fixed rate offer with no ongoing bank fees.
Newcastle Permanent Building Society Fixed Rate Home Loan - 2 Years Fixed (Owner Occupier, P&I)
3.89%
4.94%
$595
$0 p.a.
90%
10% deposit option available
Borrow up to 90% of the value of the property you're buying and pay no application or ongoing fees.
UBank UHomeLoan - 3 Year Fixed Rate (Owner Occupier, P&I)
3.74%
4.01%
$395
$0 p.a.
80%
Lock in a low rate for 3 years
A competitive fixed interest rate product with no ongoing bank fees.
ClickLoans The Online Investor Home Loan - LVR <80%
4.18%
4.18%
$0
$0 p.a.
80%
Competitive investment mortgage
Investors get a 100% offset account and pay no application or ongoing fees on this loan from an innovative online lender.
ME Flexible Home Loan Fixed - 2 Year Fixed Rate (Owner Occupier, P&I)
3.99%
4.86%
$0
$0 p.a.
80%
Fix your rate for 2 years
Access a fee-free 100% offset account and pay no application or ongoing fees.
UBank UHomeLoan - 1 Year Fixed Rate (Investor, P&I)
3.99%
4.62%
$395
$0 p.a.
80%
Flexible fixed investment loan
Investors can enjoy flexible repayments and an easy application process with this pioneering online lender.
ClickLoans The Online Home Loan - LVR <70%
3.70%
3.70%
$0
$0 p.a.
70%
You need a 30% deposit to get this mortgage
Get a discount for keeping your LVR at 70% or below with this innovative online lender.
UBank UHomeLoan Variable Rate -Discount Offer for Investor Variable P&I Rate
3.99%
3.99%
$0
$0 p.a.
80%
Special discounted interest rate
Get a discounted, low-fee investor loan from a convenient online lender. 20% deposit required.
Greater Bank Ultimate Home Loan - Discounted 2 Year Fixed LVR ≤90% ($150K+ Owner Occupier)
3.69%
4.54%
$0
$395 p.a.
90%
10% deposit option available
A fixed rate loan with a 100% offset account and the option to make additional repayments. Loans over $150k receive a discounted rate. NSW, QLD and ACT residents only.
Yellow Brick Road Empower Home Loan - 3 Years Fixed LVR up to 95% (Owner Occupier P&I)
4.29%
4.26%
$0
$0 p.a.
95%
A competitive 3-year fixed rate loan with a high max insured LVR.

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Credit services for Aussie Select, Aussie IQ and Aussie Optimizer products are provided by AHL Investments Pty Ltd ACN 105 265 861 Australian Credit Licence 246786 ("Aussie"), and its appointed credit representatives. Credit for Aussie Select products is provided by Residential Mortgage Group Pty Ltd ACN 152 378 133 Australian Credit Licence 414133 (“RMG”). RMG is a wholly-owned subsidiary of the Commonwealth Bank of Australia ABN 48 123 123 124 AFSL and Australian Credit Licence 234945. Credit for Aussie Optimizer products is provided by Perpetual Limited ABN 86 000 431 827 (Lender). Credit for Aussie IQ is provided by Macquarie Bank Limited ABN 46 008 583 542 AFSL and Australian Credit Licence 237502. Home loans issued by the Lender are serviced by Macquarie Securitisation Limited ABN 16 003 297 336, Australian Credit Licence 237863 (MSL).

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Important Information*
UBank UHomeLoan Variable Rate - Discount offer for Owner Occupiers, P&I Borrowing over $200,000

Take advantage of a low-fee mortgage with a special interest rate of just 3.59% p.a. and a 3.59% p.a. comparison rate.

loans.com.au Essentials - Variable (Owner Occupier, P&I)

A competitive interest rate home loan with interest only options. Interest rate 3.64% p.a.
comp rate of 3.66% p.a.

Greater Bank Ultimate Home Loan - Discounted 1 Year Fixed LVR ≤90% ($150K+ Owner Occupier)

Loans over $150k get a discount off an already low fixed rate. Available for NSW, QLD and ACT residents only.

Newcastle Permanent Building Society Premium Plus Package Home Loan - New Customer Offer ($150k+ Owner Occupier, P&I) Discount 1

New borrowers or refinancers can get a discounted rate with this package loan. Bonus $1,500 cashback for refinancers.

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